Turning the Corner.

Evening Post, Volume CIII, Issue 144, 21 June 1922, Page 11

Turning the Corner.

What are the Grounds for Optimism ?

British and American Trade Positions Reviewed.

"The World Oui

It ia a loag and weary, and sometimes exasperating process, this getting back to what is called normality—if conynercial and industrial conditions approximating fcliose oxisting before the war are to be taken as the goal to be reached. Perhaps it would be better to forget all about them, and start afresh with new ideas and ideals, based upon' what: is and is likely to bej rather than what has been. Some light on the obscure subject of the future can be gained l?y looking the present squarely in the face, not forgetting certain ancient elemental principles connected with industry and trading .which are often lightly esteemed and sometimes temporarily tampered with. Trade and industry have for some years past been carried on on a paper basis. It was largely so before the war dislocated everything, and necessitated resort to expedients that were carried far beyond accepted limits, consistent with safety in times of peace. For instance, every bank "note was a promise to pay coin on demand. That promise was faith- ' fully fulfilled except in those rare instariccs of bank failures; but to-day most banks in the British Dominions have the right by law to refuse payment of notes in gold on presentation at the counter, for notes have been made legal tender. The day may return, when anyone wanting to change a poun/I note for a. gold sovereign can do so on presentation to any bank teller in the British Dominions. The combined banks in New ' Zealand, as a matter of fact, have the coin in t'Jeir valuts now, and could pay it for all the notes they have out, and then have plenty over, at any rate they • could do so on 31st March last. GOLD FOR PAPER. On Jsth March last the United States Treasury did, as a matter of fact, r«siime the issuance of gold certificates on ordinary cheques, and gold reappeared. Re-establishment of an unrestricted market for gdld is to-day^ being discussed in London. These are signs of the;'corner being turned, signs of the abandonment, however useful it may have been in the ' emergency arising out of the war, of the artificial currency system to -which is attributable so much of the worry of the present time, affecting the farmer as much as anybody else. The old simple barter basis is the right ideal if it could be earned out. 'It cannot, in modern trading conditions, and with markets 13,000 miles away. It ] might work in Mark Twain's village when he was a printer's dcvi' and the subscribers paid for his employer's newspaper with pumpkins and firewood. A man-with a gold watch, and chain need not die of hunger if he can I pawn his watch and chain; but if he had nothing left but his word when he again went to the pawnbroker for a loan, even if he gave that word in writing the chances are as a million to one that he would go empty away. So the whole world has been living mainly on a paper basis; Russia has been living on a paper currency, until, it is said, the rouble notes now cost more to print than they are worth in purchasing '.jower. Herein is seen the naked'truth that something cannot for long be obtained for nothing. Russia is producing little or nothing in the way of materials—butter, wheat, flax, and other produce for instance—for home consumption, let alone . for export, and while it got along for a time with the printing press turning out billions of roubles, even that is coming to an end. The New Zealand farmer is not so foolish as to imagine that he can get something for nothing, but many farmers do think that they are not getting enough for what they produce, having regard to the cost of production. This explains the desire, as expressed in pooling and similar schemes, to get back not only the cost of production and a reasonable margin of profit, but a little more on top of both. This is only human nature. The difficulty arises as to how much more those who buy the farmers' produce are willing or able to pay. Around that centres all the fighting. It is not denied that markets can be manipulated, that supplies can be withheld for a rise, and artificial • scarcities created for the purpose of personal or grouped advantage..; but in the long run everything goes in one direction—to that point at which producer and consumer clasp hands and agree upon the price of the article which, the one furnishes and the other requires. THE FAIR PRICE POINT. There have been times when the pro lucers have put more goods—absolutely necessary foodstuffs and materials for ilothing—into the markets than the consumer can buy. Of course, markets can 'ie over supplied, but they can generilly absorb as much, as New Zealand has to supply of meat, wool, butter, an.' cheese. It is all a question of pur; iss ing power. • When prices are ton high, then a great many of the consumers have to go without or resort to substitutes. Going without is generally followed by a collapse in prices, sometimes to well below cost of production. The recent great slump in the price of wool, with a half-clothed world wanting woollen clothes, was an instance. So it was with meat a' the very beginning of last season in No"' Zealand. Butter and cheese, now imprc /ing on account of dry weather in England, also similarly suffered. It is quite true in regard to butter that some heavy holdings by the British Government were suddenly let loose on a fairly well-supplied market with the result that •,he price fell away to an unpayable point. It is quite true that the so-called "mountain of wool" held by the British Government in England, Australia, and New Zealand, and that held by growers tliemßelves on their own account, cast a black shadow over the wool market, for

[look is Better."

with such a vast accumulation as was at one time in sight manufacturers were naturally extremely careful how they bought. Besides that, manufacturers had hadi their own troubles, and they wore mainly financial, although industrial unrest only accentuated those difficulties connected with money. But it is indeed a long lane that has no turning, no corner to break the monotony. That corner is not only in sight, it is being turned. The Prime Minister, speaking- at Dunedin recently, said he had hazarded s.everal opinions as to what might happen in the past six months, and ha bad not been far from the, mark with regard to wool, meat, and butter, and he would say now that we had not nearly reached the peak so far 2S crossbred wool was concerned In another two years all would see wool dearer than it was now. ' ■ Wool seem 3 to have turned the corner. Why, may be ascertained from perusal of an article in this issue on this subject by Sir Arthur Goldfinch, chairman of the British Australian Realisation Association. BUTTER AND CHEESE. • First, as to butter and cheese. It may be of interest to review their prices for the past six months, the conclusion being based _on the quotations of the High Commissioner. New, Zealand butter prices'collapsed in London at the end of December, and fell to 118s to 126s per cwt.,- the first week in January, but it had improved by the middle of January. The heavy fall was attributable to the Imperial Government declining to clear its old stocks of New Zealand butter. At one time the Imperial Government was negotiating with buyers outside the usual distributing houses, at 100s. Con•equently, the tirade was very cautious in purchases of new season's make, which it might have to sell in competition with old stocks at a reduced price. The Imperial Government determined to close its butter departments, and to dispose of its balance at the best price obtainable. A committee of importers secured «. firm offer. The quantity involved, it may be remembered, was 310,000 boxes of New Zealand, and 530,000 boxes of Australian, which it was proposed to sell at once at 100s per cwt., and 84s per cwt re•pectivdy. The market was demoralised. As soon as this difficulty was overcome the price improved, and at the end rf January, New Zealand butter of the new make ros.e in a week from 130s to 135s on 21st January, to 140s to 145s a week later. Prices steadily improved and on Ist April were 188 3 to 1955. There was a check in the following week, but again prices varied upward, only 'to sag again, «s was only to be expected, as British, Irish, and Continental supplies became available. However, it has not only improved, but there are indications that it hag become stable, and the threatened spell of dry weather in. Great Britain, as reported last, week, would indicate that better returns will be received, at any rate, until production of butter in the dairying districts of the northern hemisphere is resumed] on something! like its normal scale. There is still the absence- of Siberian, competition to be taken into account as a factor favourable to the British demand for New Zealand butter. ' Cheese was not threatened with awholesale swamping of the market as butter was in December last, but it has greatly fluctuated in price. There is always a difference one way or the other In the price of white and coloured. This is due to public taste.' It costs practically no more to make coloured; than white, but sometimes there is a margin of several shillings per cwt. between them. It all depends upon public demand. •Oolouredl may be worth £1 per cwt. more than white cheese one week, and tho position reversed the next. But cheese has had its ups and downs in price during the past year, although the market is towards stability. 'On 11th June, 1921, white cheese1 was 106s ,to 116s per cwt.; on 6th August 132s to 138s; on sth November 86s to 965; on 10th June this year it was firm at 80s to 84s. "GOOD-BYE" PRICES. Compared with prices realised for butter and cheese under Imperial purchase those above quoted look foolish.' They are, however, what producers have to gt> upon. Wool prices are becoming stable. They are not only back to uormjl (if pre-wa*r rates can be so describedl), but in some case 3 below cost of production. But they are on the mend, and have made a good recovery, all things considered. That they will ever reach Government purchase prices again is extremely doubtful. Tho extreme prices realised for fine wools when, it was marketed for civilian purposes, and immediately after the Armistice were abnormal; "unhealthy" they were described, and so they proved. Notwithstanding the slight decline recorded at the opening of the June sales in London, wool appears to have turned the corner. Growers are directed to the special references made to the future of wool by Sir Arthur Goldfinch. The Meat Pool was instituted when grave disaster threatened the industry, and stock was sellino- for a song. Imperial Purchase prices looked a long Way off then, and pastoraiists were in n. ( bad way. London quoted lightweight New Zealand lamb at 7|d per lb at Christmas time; it improved fb lOd lb and over in January, and for new season's, from lid and up tolled through March, April,' May, and well into June. The Prime Minister takea a personal view of the New Zealand frozen meat market. He attributes much of the im-

provement to the origination and exi»tence of meat export control, but thero is jio doubt about the improvement of the frozen meat market 6ince last December. Lightweight New Zealand mutton, was then'in the vicinity of sjdl to 5-Jdi per lb; it is near 8d to-day. It began to go up in January and reached 8d before that month wag out, receding to round about 7^d, and staying there until Bth Apnl when it was quoted at 8d to B|d, going back to about 7^d in May, with a tendency to touch as high, as Bjtl, and then falling back to 7£d in June. These are approximate figures in every instance. . Beef is the weak spot. Thero are reasons for it. First, the enormous production of beef in all exporting countries of the world when it'was realised that beef was wanted more than any other! meat for the war. Mr. Massey, speak- I ing at Dunedin Winter Show, furnished another, but not the sole reason, for the weakness of beef in the meat market, | Ho said): "The Dominion must be very careful of its beef. He had. seen beef in London that did no credit to New Zealand. It had been in store for such a time that it had deteriorated and looked disreputable." New Zealand beef, hindquarters, opened the new year in London at 4f d per pound, and went lower in price until! in March it touched 4d and stayed at 4d to 4-£ d throughout April and May, and well into June. , j It seems evident, takingl into account j the general npward. tendency of lamb and : mutton, that beef is in over-supply. Mr. Massey's idea of the special circumstances connected with the beef market were thus summarised by him:— "The .fault was not with the beef, but the trouble was this: The war had given a great impetus to the production of beef in the South-American countries. New Zealand had now to compete, not only with. Argentine, tut witli Patagonia, Brazil, Uruguay, and Paraguay. Of course, New Zealand was not out of the beef market in London, and was not likely to be out of it altogether, but the beef that sold well in London was the three-year-old beef, well fattened. London paidi a good price for what it liked, and would not have anything less at any price." SIGNS OF REVIVAL. So far, prices of the country's chief products in. the British markets have been reviewed, their position at the beginning of this half year, with where they are today. What of the future? There is nothing more rash than prophecy in regard to prices. The recent sharp recovery of the butter market, due, it seems, to unexpected dry weather, is a case in point. It was confidently expected here that New Zealand butter and cheese prices would recede as the produce of the northern season became more abundant. It always did before the war disturbed the equilibrium of all markets, and it was expected to do so this time. The unexpected has happened, and prophecies have been falsified. But phono- _ menal weather apart, what are the prospects of trad© recovery in Great Britain and. the' United States? Upon theml depends the stabilisation of markets for New Zealand products. , America is certainly a factor. If that country is prosperous it is due to its export trade, and that trade is most sensitive to conditions in other countries, and particularly those of Great Britain, which i» closely knit with America, and becoming more so year by year. But with respect to the United Kingdom, it is certainly nearing the corner, if not rounding it, on the showing of figures. British export trade in manufactures—upon the success of which New Zealand's markets for primary products'so much depends— for the first quarter of 1922 were better than the first quarter of 1921, by 17 per cent. This ig the statement of the British Board of Tradel, and it is both encouraging- and important. May figures, confirm the improvement. Official figures relating to shipping, also show evidence of increased general activity in the foreign trade. The Labour Gazette in March described employment as '.'still bad, but showing a slight improvement on the whole, notwithstanding the adverse effect of the engineers' great strike." This serious • obstacle in the way pf trade recovery is about to\be removed. The coal strike did damage to the trade of Great Britain, from which it is now only partially recovered, and upon that trade so much of New Zealand's own trade depends. Much ,is sometimes made ofAmerica, and the exploitation of its meat, butter, and wool markets, but high tariff walk have to be surmounted! there. The wonder is, considering this fact, that the trade New Zealand does with tha United States is so large, especially in wool. But Great Britain has no tariff against New Zealand's principal exports. UNITED STATES TRADE. ' T^e terrible reaction in trade after the war affected the United States as well as other countries directly concerned in the war. All had their domestic trouble of a political and industrial character. But in America there, were commercial difficulties every bit as grave as those experienced in Great Britain—war profits absorbed' by post-war losses and weak houses going k the wall. There was trade stagnation with severe unemployment What are the prospects there? —for indirectly, they have an influence on the trade and commerce of Great Britain, New Zealand's best and biggest customer? Mr. S. E. Ward, vice-presi-dent of the National Bank of Commerce, New York, has put the situation in two paragraphs, which are here reprinted:— "Business is better. The depression which began in the United States in 1920, and continued throughout 1921 has passed, and substantial progress has already been made toward normal activity and a new business cycle has been entered upon. Adverse conditions, as the coal strike, may temporarily retard the upward swing. Other factors, such as widespread crop failures, might, even result in recession for a time, but no circumstances can alter the fact that there is now an unassailable basis for confidence in slow and steady expansion of the commercial and financial activities of this country. "This basis for confidence is fivefold: First, there is plenty of money to be had at reasonable rates both for short-time and long-time : requirements. Second, stocks of finished goods and of raw materials have been reduced to reasonable proportions. Third, commodity prices are stabilising. Fourth, conditions in bade

industries, including a,griculture, are improving, and production is expanding. Fifth, gains are not confined to the United States. .. Conditions are improving throughout the world. Some countries | constitute exceptions to this statement, but their ibearing on the international situation is not gTeat enough to alter the fact that the world outlook is better, with the United States and Canada in ths forefront of improvement." THE DEPRESSION PASSING. This is the cautious statement of a banker, and, it will be noticed, h« seesthat "conditions are improving throughout the world," or, in other words, that the corner is being turned. There is, then, every reason for farmers and traders, to take a brighter, view of the coulee of prodiiction and trade in the Old Country, and in the United. States, with which in so. many nonpolitical ways it is connected. With a brightening of the .manufacturing prospects of the Mother Country, including coal mining—the output of. which is steadily increasing—there will be more assured markets for New Zealand products,- especially ' wool. Occasional slight setbacks there certainly will be. Prices will always fluctuate. But stability of markets is now more apparent than; at any time since the war. It-is for the New Zealand farmer to face the new conditions rather than to repine for the old, which have no chance, it seems, of ever returning, when wool all round brought liktper pound; butter went up to 2e 6d per pound, and cheese lOjjd f.0.b., and beef was wortii 4||d to 5d per pound free on board. A glance at the table of compartive prices,l appearing in another column, will show that, after all,' the British market is doing its best in the. untoward circumstances of our times to give, the producer a fair return. The produce is wanted." The ability to pay the price and to produce at the price is at the root of the matter. But there are valid reasons,1 and many of them; for believing the world-wide depression in trade to be passing, and New Zealand will be among the first countries to feel the benefit of the improvement. The. corner is not yet turned, but it is being turned. .-

STATISTICAL DIFFICULTIES. Unfortunately, however, Custom House statistics in wool, as in other articles, are much less reliable than they claim to be. In 1913 an attempt was made to assemble from Board of Trade figures the aggregate import and export figures for wool of all the commercial countries. The imports totalled 2,783,000,000 pounds and the exports 2,416,000,000 pounds. The official explanation was that- there was a very large interchange of wools between the United Kingdom, France, Germany, and Belgium, with consequent duplication, but this explanation is obviously of no value, because, however many times the same wool is interchanged, if all statistics were accurate, every pound exported from one country would figure in the imports of some other country. The true explanation is to be found m other directions. There is a great seasonal variation in the movement of wool, and wool exported to a distance at'the end of one calendar year figures in the imports of the receiving country in the next year. Wool tops and the various hairs figure as wool in the statistics of some countries and not in others. Making allowance for differences of this character, there can be little doubt that a great part of the remaining discrepancy is due to inaccuracies in statistical/returns. It is unfortunately impossible to apply in any complete manner a check by comparing the quantities of wool theoretically retained m each country with the quantity pasing through the machinery. Except in the United States, no satistics of the consumption of textile mills are published, and it is very doubtful whether in any other country they are accessible even to manufacturers' associations. For three years during tho war returns of wool consumption were demanded from the manufacturers by the Wool Control, but when control was relaxed the wool trade persisted in dropping the compilation of these returns, though it would have been so much to their advantage to continue them. |

WOOL MOVEMENTS. "I have attempted to the.-best of my i ability to compile from the most authen- I .'.-■■ • i ,

into Poland from Russia by more or leat contraband methods, the 268,000,000 which figure at the bottom of the table are being used for the local requirements of the producing countries, and are very scantily sufficient for that purpose. Those countries are reckoned to have retained in pre-war years at least 480,000,000 pounds per ajinum. As against the production of 2,340,000,000 in those countries which freely trade in wool, the following figures of consumption stated in million pounds will be interesting:—

" The larger figure in each case is the quantity which would be consumed if the full working programme' of each country were executed. The smaller figure is the quantity to which the usual consumption tends to be brought down by strikes, temporary stoppages of special classes of material, breakdowns of demand, etc.'1 It is quite impossible,. for the reasons I have given above, to give precise figures for a, given period <Si twelve months for any country except the United States. It is also very difficult to avoid duplication, because wool has been worked up to a certain stage}-{or instance, combed into _tops in one country, and is worked up to further stages in the machinery of another country. Endeavouring to avoid as far as possible such duplication, and to collate and .assimilate all the available data of many different kinds and from many different sources, I have arrived at the conclusion that" about' 2,600,000,000 pounds of wool was consumed in the world, excluding European Russia and

world in general as the havoc of war is repaired, will affect the problem of wool supplies. The disturbed countries which it is hoped to restore gradually to their normal productive and consumptive power were not in pre-war days, having regard to their area and population, very important factors in the wool situation, and, with the exception, of Russia, a more rapid return to the normal than might have been' expected has already taken place. Germany has found means to supply herself with raw wool' in sufficient quantity to set the greater part of her mills going at nearly full time all the year round, and her success in this respect has caused not a little envy in this and other competing countries. The depreciation of the German currency brings about a great reduction in labour costs. Czecho-Siovakia contains in her territory the greater part of what was the Austrian textile area, and the mills in that district had a considerable output in 1921. The mills in what is now Austria, have been insufficiently supplied with wool granted by the British Govworld in general, as the havoc of war is doubtful now any further supplies of wool for Austria can be financed. The Polish mills are largely financed by French capital, and to a much smaller degree by British capital. A considerable quantity of wooland tops has been supplied to Poland from abroad, and as above mentioned the supplies are no doubt largely eked out by Russian wool, which dribbles across the frontier without being recorded in any Custom-house returns. The total additional quantity of wool which would be required to bring up to full normal working capacity all the mills in Germany, Austria, Czechoslovakia, and Poland, and to supply the home needs of the peasants, would not at the utmost reach 100,000,000 pounds, a quantity which is not a large percentage of the total figures involved. There can b© little question that the re-establish-ment of orderly conditions in the enormous areas which have been disorganised by the war would almost automatically rectify a considerable part of the wool shortage in these regions. There is no reason in the world why and Turkey should maintain fewer sheep now than in 1914. On the contrary, it is probable that a greater degree of work and intelligence applied under settled conditions to the sheep industry would vastly, increase the aheep flocks without diminishing any other of the fruits of the earth. In Siberia alone there can be little doubt that there are great tracts of lahd^on which sheep could be fed carrying heavy fleeces of fine wool, instead of the mongrel sheep carrying light fleeces of very coarse wool which graze almost untended over Asia. I do not consider, therefore, that the increase of demand for .wool through the re-estab-lishment of peaceful conditions would tend to aggravate the shortage. Precisely in those regious which have suf-fei-ed most from the unsettlement it would be most easy to increase the supply if order. and settled habits of in--dustry were restored.

UNDENIABLE WOOL SHORTAGE.

"That a tendency in the direction of wool shortage now exists it is perfectly idle to deny. Only those people who are obsessed by the large supplies which are concentrated in. the hands of the BritishAustralian Wool Realisation Association can fail to take note that those reserves are being rapidly eaten into, and that an urgent necessity will very soon arise for increasing the annual growth of wool. To suppose that the problem will be solved by a decrease of consumption is contrary to reason and experience. A small but appreciably early increase of consumption of wool was taking place steadily before the war, and this increase was only interrupted by abnormal conditions which to some extent have already been rectified. It is extremely unfortunate that the accumulation of a large surplus of ■ Australasian wool in one hand, together witb a certain dislocation, between supply and demand in the various qualities of wool—the medium and coarser grades being unduly neglected—should have discouraged sheep farming in several important areas. The diminution of wool production in the River Plate Republics is probably! inevitable as the growth of the population and the increase of railway facilities promotes arable and dairy farming, but the rate of diminution during the last two years is unprecedented, and, is undoubtedly the direct result of the enormous fall in the, price of crossbred wool. The two countries were estimated to produce 515.000,000 pounds just beforo the war. In 1921 the figures were reduced to 581,000,000 pounds. Very little above 300,000,000 pounds can be expected this year. This coincides with a decline of - nearly 100,000,000 pounds in the United States, and except to a small extent in Australia, no important wool-producing country is now on the up grade. Though the high prices now being paid for merino and fine crossbred wools —which are aliric-st certain to increase still further in the near future—are very satisfactory to Australiap sheep farmers, and will stimulate their production to the highest possible extent, it is unfortunate that sheep of that character can only be' bred to perfection on comparatively limited areas. So long as the rearing of crossbred sheep is unprofitable owing to high labour costs and cheap selling prices for the wool and mutton, it is difficult to, see how the shortage in wool production, which is now an unmistakable fact, can be rapidly corrected.

"In conclusion, I may suggest as a useful sidelight upon the broadest aspects of wool supplies, that in the United Kingdom and the United States the closest possible estimateXgives a. figure of slightly over five pounds of, raw wool per head per annum as the quantity actually used by the inhabitants of those countries. Applied to the population of the whole world, it is evident that consumption on this scale would require the production to be more than doubled. A similar comparison of other principal articles of universal consumption would, however, bring out a much greater contrast between the consumption of the most advanced countries and that of the world as a whole.,1 The .statistics .seem to show that the use of wool is much more evenly distributed over the wdrld's surface than that of most commodities. The great populations of India and China are tho most remarkable exception to this* rule, but no great development of tho use of woollen goods in those countrios need be expected in the near future." '

i i Consumption. ! United States .-. -..-...r... 600 to 700 United Kingdom 580 to 680 Germany : 320 to 400 France 300 to 400 Belgium 100 to 110 Italy... 70 to 100 Poland (excluding Russian , , and Asiatic wool) ...100 to 150 Austria ' and Czecho-Slo-vakia (.'. : 70 to -90 Other EuTopean countries 115 to 155 Other countries :.. 140 to 180 2395 to 2965